A friend of mine posted a link to an article this morning he prefaced with the question “Is sacrificing your religious liberty the price of market participation?” The article, by Benjamin Wiker, entitled “The Religious-Liberty Quagmire to Come” discusses a recent Slate article sympathetic with the current HHS mandate overreach in which government attempts to abrogate the rights of people to exercise their religious liberty with their property, specifically duly chartered legal business entities.
The article’s author opposes the viewpoints expressed in the Slate article, by author Dalia Lithwick. I oppose them also, but on grounds originating not just in my studies, but also by practical experience and logic.
The first point raised is this:
Lithwick argues, first of all, that corporations are distinct entities from individuals.
This is true in a literal sense. Corporations have a legal identity that are separate from their owners in the same way that I have a legal identity that is separate from my oldest son. You’ll note that I did not use my wife in that example. It was not an accident. While she is indeed an entity that is distinct from myself, we happen to live in a community property state, so we “enjoy” the dual status of having distinct legal identities, while legally being considered as having the same legal identity for legal, and more to the point, commercial, purposes. This reality is imposed upon us by the state, which applies this status based upon an action we took based on a shared religious conviction, and retain based upon that same shared religious conviction. We are each “owners” of that resultant fictional legal entity known as a “marital community”, which, at least in our case, exists and acts in both personal and commercial transactions in ways that express or are the result of our individual religious beliefs.
While individuals can have religious beliefs, corporations can’t. Once you establish a corporation, it is automatically a secular corporation.
This is what we called in law school a “false starting premise”. The reason is simple. The state’s blessing to act as a corporate entity does not automatically confer a “secular” (like the author of the piece, I also object to the common use of the word “secular”, and for the same reasons, however, for the purpose of this essay, I will use it in the context of the incorrectly presumed “neutrality” in which it is often used) status on the resulting entity. The reason for this is simple. State enabling statutes almost always permit corporations and limited liability companies to be established “for any lawful purpose”, which by its nature would include the conducting of any lawful business in a manner consistent with the religious faith of the owners of the entity in question. In fact, thanks to the First Amendment, and its extension to the individual states, the states would be legally prohibited from restricting individuals from forming entities for such purposes.
The other obvious weakness in this rather remarkable assertion from Ms. Lithwick would be the fact that churches often incorporate as non-profit corporations in order to apply for Section 501(c)(3) status so that donations, gifts, and tithes maybe tax deductible to the donor. (Contrary to popular opinion, churches do not have to apply for this status to be tax-free. They are already tax-free, as they should be, as a result of the First Amendment.)
Wiker states that Lithwick’s assertion is rooted in the decision in the Conestoga Wood Specialties Corp. decision. The corporation is owned by a Mennonite Family which employs 950 people. The family opposes the HHS mandates regarding abortion on religious grounds. The Federal Judge hearing the case concluded:
“We simply cannot understand how a for-profit, secular corporation — apart from its owners — can exercise religion,” circuit Judge Robert Cowen wrote. “A holding to the contrary … would eviscerate the fundamental principle that a corporation is a legally distinct entity from its owners.”
Aside from the naked and unsupported (and unsupportable) conclusion that a corporation is secular, there are a few other weaknesses. State law would rightfully permit me to draft and file for a client Articles of Incorporation or a Certificate of Formation establishing that the entity is “being formed for the express purpose of selling ice cream, and spreading the gospel of Jesus Christ, and any other lawful purpose,”, and there is nothing that the state or the Federal government could Constitutionally do to prevent me from doing so. Being a distinct legal entity doesn’t mean that a corporation cannot express or conduct itself based upon a specific political or religious viewpoint. And while there are instances in which government may lawfully restrict what an owner does with its private property in certain balancing of the equities situations, at this time, I can think of none which directly conflict with the right of conscience.
The assertion of an automatic secular nature of corporations based on a theory of complete segregation between a legal entity and those that own them faces other philosophical and logical difficulties aside from being an assumption of a fact not in evidence. First among them is the fact that one of the pillars the good Judge rests his opinion on is the notion that that an individual can exercise religious freedom, but a corporation cannot. This point ignores the fact that corporations ARE allowed to exercise other First Amendment rights, such as freedom of speech, and Freedom of Association, which is the main principle underlying the freedom to enter into contracts with people of your choosing, or the freedom to hire people who you think make a good fit with your corporation, and will make a good employee. Recognizing this, there is no logical or legal basis to presume that these freedoms can be exercised by a corporation or an LLC, but that those same entities can or should be barred from exercising religious freedom to act in a manner consistent with the religious beliefs of its owner.
The second weakness with this assertion is the fact that the income from many of these “separate, distinct legal entities” is reported not on a separate tax form for that entity, but on the personal tax forms for those who own those entities, which would hardly make sense if these were indeed separate and distinct from their owners.
The third weakness of this viewpoint is that our economy would be in much worse shape without corporations and LLCs because they make it possible for more people to provide goods and services at prices and in quantities that the risk that they would necessarily have to bear individually would either make prohibitively expensive, or practically impossible to provide. While the very word “corporation” often evokes the image of boardrooms filled with grey suits making decisions that impact the livelihood of hundreds or thousands, or more, the fact is that the majority of corporations are closely-held businesses, where the ownership consists of a individuals, or small numbers of people, often members of the same family, or of one or two families. And in some instances, this is also true of those large corporations that I previously spoke of. Ford is one example that comes to mind. However, even if it wasn’t for the fact that a majority of these entities are small, closely held corporations or LLCs that permit individuals to offer products or services because of the risk management that the law permits through the use of these entities, there is also the fact that the law DOES allow certain individuals who offer goods and services through corporations and LLCs to refuse to offer those goods and services based on the individual owner’s right of conscience and/or religious beliefs, among other factors. Doctors, who can refuse to perform abortions, and attorneys, who can refuse representation based on any factor at all, are two that come to mind. While competence or having the requisite skill are among the reasons for these rights of refusal, they are not the ONLY ones. And while it might be tempting to say that the personal nature of services rendered by these professions support such an exemption, the fact is that for nearly all closely-held business entities, the nature of what those individuals do is personal. For such individuals, their business is at the forefront of their thinking. It is the first thing they think of in the morning, it is what they contemplate as they drift off to sleep at night. Their businesses ARE an expression of who they are, and that “separate legal entity” invariably becomes associated with the individuals who own them. The manner in which they conduct their business often expresses an opinion or a philosophy held dear to the owner of that business. It is not reasonable or logical to suggest or expect that these individuals segregate their religious and spiritual identity and activity from the profession or career that they otherwise breathe and eat; to do so would be a denial of the very essence of the person that the law and society would find morally objectionable and repugnant if any other belief or activity was being discussed instead of the free exercise of religion. This is no less true for a baker of wedding cakes, or a photographer than it is for a doctor or a lawyer who has incorporated so they can ply their trade without risking the loss of everything they own and have worked for to one lawsuit.
Another logical weakness in this assertion is that many of these entities often are operated day-to-day in accordance with various codes of ethics voluntarily committed to by the owners and employees of the corporations and LLCs. For an entity to be, even indirectly, conducted according to such a code of ethics, but presumably not capable of exercising a religious point of view is facially absurd.
I’d like to think that things will get better, but the current prevailing prejudice against religion in some of the most litigious groups in our society leads me to believe that we’re in for a lengthy fight to preserve our first liberties. Especially if examples such as the New Mexico photographer, and the pink swastika philosophy that seeks to punish those who do not wish to participate in their activities, regardless of whether not it makes any logical sense to compel those who object with their beliefs to provide a personal service or product is any indication. But then, with a federal government that is engaging in similar unconstitutional behavior as a guide, there really is no reason to be surprised at the bold entitlement demonstrated in this strategy, which is why legal interest groups such as the ADF are going to become increasingly important and need our help in the coming years.